02 Feb EU announces green investment plan to compete with other nations

The plan would boost national support for businesses through additional investment aid and tax credits.

The European Union has announced a roadmap with plans to main the competitiveness of selected industries as the region continues to try and maintain pace with the US and China, both of which provide significant subsidies for domestic green technologies. 

According to a recent proposal, the European Commission intends to apply the Green Deal Industrial Plan to increase national support for businesses via investment aid and tax credits, while also utilising European funds to assist critical projects in sectors like hydrogen.

EU leaders are discussing the plan, which could be a response to the US introducing the Inflation Reduction Act (IRA), including approximately $500 billion in new spending and tax breaks over the next decade. The plans by the EU have gained a mixed response, with some member states concerned that the subsidies will provide added support for rich nations like Germany, which have the financial capacity to invest in domestic businesses. 

EC president Ursula Von Der Leyen recently explained that we have one of the greatest opportunities to pave the way with speed, ambition and a sense of purpose to secure Europe’s industry in the rapidly expanding net-zero tech sector. 

European leaders are concerned that the subsidies provided in the recent US green package will impact the competitiveness of European businesses and potentially divert investment toward the US. Last month, Belgian PM Alexander De Croo suggested that the US was steering green industries away from the region.

The European Commission declared it didn’t intend to raise new financing in the package due to over 380 million euros of joint funding already being allocated toward the green transition up to 2030. Instead, the EC intends to simplify regulations, accelerate permits and focus on cross-border projects. The proposal also calls for ease of state-aid measures that limit national subsidies to enable a fair playing field within the EU internal market. 

German economy minister Robert Habeck explained that state aid processes must accelerate. Habeck believes procedures should take only months, not two or three years. Habeck also highlighted that funds can increase the production of clean energy technology. Some member states are concerned that easing state-aid rulings would favour larger nations. Giorgia Meloni, the Italian PM, believes we should be helping businesses but can’t risk weakening the single market and must remain focused on guaranteeing a level playing field.

Focus on enhancing domestic skills

Studies suggest that between 35% and 40% of all jobs could be impacted by the green transition and as a result, developing the skills for well-paid positions will be a priority within the European Year of Skills. To deliver the necessary skills, the Commission intends to create a net zero industry academy to introduce upskilling and reskilling projects in selected industries. 

The European Green Deal was presented in 2019 and listed the goals of making Europe the first climate-neutral continent by 2050. The European Climate Law incorporates binding legislation to work towards climate neutrality and focuses on a short-term target of reducing greenhouse emissions by 55% by 2030, compared to 1990 levels. 

In the transition to net zero, Europe’s competitiveness will largely depend on its ability to develop and manufacture clean technologies to enable the transition. The European Green Deal Industrial Plan was announced by President Von Der Leyen in a speech at the World Economic Forum in January 2023 as a plan for the EU to refine its competitive edge through clean tech investment and work toward a path of climate neutrality. The plan responds to the invite by the European Council to make proposals to enhance the framework conditions for investment, with a focus on strengthening the resilience and competitiveness of the EU.